Purpose of the Bill

The purpose of the Social Security (Administration) Amendment (Repeal of Cashless Debit Card and Other Measures) Bill 2022 (the Bill) is to abolish the cashless debit card (CDC) program in Part 3D of the Social Security (Administration) Act 1999 (SSA Act) and to facilitate arrangements for individuals to enter or re-enter the income management regime under Part 3B of that Act in certain cases.

The Bill will also make consequential amendments to the A New Tax System (Family Assistance) (Administration Act) Act 1999, the National Emergency Declaration Act 2020 and the Social Security Act 1991.

Background

The cashless debit card program is one of two schemes for income support recipients that aim to limit spending on harmful goods such as alcohol, illicit drugs, and gambling. The other scheme is income management.

Both income management and the cashless debit card were first implemented in Indigenous communities and then extended to communities that are predominantly non-Indigenous.

The cashless debit card and income management’s BasicsCard attempt to restrict access to cash by blocking cash withdrawals and transactions involving excluded goods or at merchants that sell excluded goods.[1] While the cashless debit card and the BasicsCard are provided by payment company Indue,[2] they were developed separately and operate in different ways.

Income management is the older of the two schemes. It was created in 2007 as part of the Howard Coalition Government’s Northern Territory Emergency Response (commonly known as ‘the intervention’).[3] The scheme was further developed and expanded under the Rudd Labor Government.[4]

The cashless debit card was developed in response to a recommendation of the 2014 Forrest Review.[5]

The cashless debit card program

The cashless debit card program was designed to reduce the amount of money from income support available for the purchase of alcohol, illicit drugs and gambling, help participants with their budgeting strategies and encourage socially responsible behaviour.[6]

It is designed to function in two ways. For recipients with alcohol, drug and gambling problems the card restricts the amount of payments they can spend on excluded goods. For recipients without alcohol, drug and gambling problems, the card is meant to protect payments from demands by family members and others who want to spend money on alcohol, drugs or gambling.

How the cashless debit card works

The program relies on Visa debit cards issued by payments company Indue and by the Traditional Credit Union (in the Northern Territory only). Cardholders can use their card at any physical store that accepts Visa debit unless the store has been blocked. Cardholders can also use the card to make online purchases at approved online merchants.[7]

Each person on the cashless debit card has a bank account known as a ‘welfare restricted bank account’.[8] The restricted portion of the person’s income support payments is placed in this account and they access it using the cashless debit card, direct debit, BPAY or other transfers.[9]

Participants generally receive 80 per cent of their payment on the card and 20 per cent in their ordinary bank account. However, these arrangements are different in the Northern Territory and Cape York. In both these locations the proportions are the same as they were under the income management scheme (for most participants in the Northern Territory 50 per cent is put on the card).[10]

The cashless debit card system works by using merchant category codes (MCCs) to block certain merchant categories. An MCC is a four digit code that identifies merchants by the kind of goods or services they sell.[11] The system automatically blocks a number of MCCs including those covering drinking places, packaged liquor stores, gambling venues and a category known as ‘quasi cash’ (a category that includes things such as traveller’s cheques).[12] There are special arrangements for merchants that sell a mix of excluded and non-excluded goods (for example, a club that sells alcohol as well as meals).

Where the cashless debit card program operates

The card is operating in six areas around Australia — Ceduna (South Australia), Kununurra and Wyndham in the East Kimberly (Western Australia), the Goldfields region (Western Australia), the Bundaberg and Hervey Bay region (Queensland), the Northern Territory, and Cape York (Queensland).

Who does the cashless debit card apply to?

The cashless debit card is targeted at recipients of working age payments but allows recipients of Age Pension to voluntarily receive their payments using the card. In Bundaberg and Hervey Bay compulsory participation is restricted to people aged 35 and under.[13]

In the Northern Territory the former Morrison Coalition Government planned to transition all income management participants onto the cashless debit card. However, the legislation which was intended to achieve that goal was amended by the Parliament to allow people to choose which scheme they wanted to participate in.[14]

In Cape York, the cashless debit card replaced income management on 17 March 2021.[15] The card applies to communities that are part of the long-running Cape York Welfare Reform trial. It is used as a sanction for individuals who have breached their obligations rather than applied to entire categories of income support recipients.[16]

Table 1. lists the current cashless debit card locations and, for each location, shows participant groups, number of participants and percentage of participants who are Indigenous.

There is no evidence the previous Government planned to expand the program to Age Pensioners.[17]

Table 1. Cashless debit card participation by location

*As at 3 June 2022.

Source: Department of Social Services (DSS), ‘Cashless Debit Card’, DSS website, last updated 1 August 2022. Australian Government, ‘Cashless Debit Card Data Summary - June 2022’, data.gov.au, June 2022.

Rationale for the cashless debit card program

The cashless debit card was created in response to a recommendation of the 2014 Indigenous Jobs and Training Review headed by Andrew Forrest. Forrest argued that many vulnerable recipients were unable to manage money effectively and that spending on alcohol, illicit drugs and gambling was entrenching disadvantage.[18]

According to the review’s report, Creating Parity, those ‘aware of the tragedy that untied welfare cash has on vulnerable individuals, families and communities have fruitlessly searched for a solution acceptable to the community for decades’.[19] The report recommended replacing cash payments with a debit card that denied access to cash and blocked spending on alcohol and gambling. Forrest called it the ‘Healthy Welfare Card’.[20]

The Abbott Coalition Government adopted Forrest’s recommendation and endorsed his claim that cash payments were contributing to social dysfunction. In an opinion piece for the Australian, Parliamentary Secretary to the Prime Minister, Alan Tudge asked:

What responsibility should we have over how welfare is delivered to those in need? Since the introduction of federal unemployment benefits in 1944, the government has provided welfare in cash. The reason is expedience: dropping cash into an account is simpler and cheaper than the traditional church welfare of providing clothes, food or vouchers.

But what happens if the cash is wasted on drugs, alcohol and gambling, leading to catastrophic social consequences?[21]

Earlier, Mr Tudge had argued that it was irresponsible to provide cash to people who were chronic alcoholics or were addicted to gambling. Describing the problem as ‘welfare fuelled’ alcohol and drug abuse, he implied that cash payments were a major cause and argued the Government had a moral obligation to replace cash income support if there was an alternative.[22]

The Government’s rationale for the cashless debit card was that it would reduce harm related to alcohol, illicit drugs, and gambling. According to the statement of compatibility with human rights for a 2020 cashless debit card Bill:

The primary purpose of the CDC [cashless debit card] program is to reduce harm at a community level from the use of harmful products such as alcohol, illicit drugs and gambling. A flow-on impact of providing this tool to help address these issues is that participants are able to stabilise their lives, leading to an increased ability to participate in the workforce.[23]

While supporters of cashless payments often refer to gambling and illicit drug use, most of their concrete examples of harm relate to alcohol abuse. In a 2017 interview Mr Tudge spoke about the East Kimberley region saying that ‘welfare-fuelled’ alcohol abuse ‘underpins so much of the domestic violence, the child neglect, and the other very significant social harms there’.[24] According to a 2014 media report, Mr Tudge claimed a ‘quarter of babies are now being born with fetal alcohol syndrome in some places’.[25]

However, despite the emphasis on reducing alcohol abuse, the cashless debit card is not integrated into the Australian Government’s broader strategies to reduce alcohol related harm. For example, the card is not mentioned in the Government’s National Alcohol Strategy 2019–28 or the National Fetal Alcohol Spectrum Disorder Strategic Action Plan 2018–2028.[26] Administratively the cashless debit card sits under the Department of Social Services’ Outcome 2, Program 2.1—Families and communities.[27]

Income management and the BasicsCard

Income management sets aside a proportion of a recipient’s income support payment to pay for necessities such as food, clothing, housing and utilities. Recipients can spend their income-managed funds using a PIN protected debit card, known as the BasicsCard, or by arranging for Centrelink to make payments on their behalf (for example, regular rent and utilities payments).[28]

Payment amounts subject to income management are paid into a person’s income management account. Each person’s income managed funds are held in an income management account within the Income Management Record.[29] Amounts standing to the credit of the income management record may be kept in a single bank account.[30] Individuals can transfer funds between their income management account and their BasicsCard.[31]

The BasicsCard was developed specifically for income management and is provided by Indue. It is a PIN protected card that operates on the EFTPOS system. It replaced an earlier system that relied on vouchers and store cards.[32] A merchant can only accept BasicsCard if they have signed an agreement to abide by its terms and have been approved by the Department of Human Services.[33]

The BasicsCard is more restrictive than the cashless debit card. Because of the opt-in approval process for merchants, fewer merchants accept the BasicsCard. Purchases of tobacco products and pornography are allowed by the cashless debit card but are prohibited under income management.[34]

In a 2020 regulation impact statement in support of a Bill which proposed to continue use of the cashless debit card, the Department of Social Services was critical of income management and argued that the cashless debit card was a superior technology:

… Income Management is a costly and complex program to run, that requires the Government to provide significant support to participants and merchants. Due to the complexity of the separate measures, including personalised targeting, different placement criteria and payment splits, Income Management is a largely incoherent policy that has a limited ability to create change within communities.

Additionally, technology associated with Income Management has not advanced as much as the Cashless Debit Card, which increases the burden on participants and merchants. It limits the number of merchants who can accept the BasicsCard, which limits the options for where Income Management participants can purchase essential items.[35]

Committee consideration

In its 28 July 2022 report, the Selection of Bills Committee deferred consideration of the Bill.[36] At the time of writing this Bills Digest, the Bill has not been referred to a Committee for inquiry and report.

Financial implications

According to the Explanatory Memorandum for the Bill:

Abolishing the Cashless Debit Card has commercial implications for contractors. Due to these commercial implications the financial impacts are not for publication. This is consistent with the financial impacts disclosed in previous budget statements.[37]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[38]

Key issues and provisions

The Government does not need legislation to end the cashless debit card program. If the Bill is not passed, the Government will not be able to operate the cashless debit card program after the end of 2022. This is due to the sunset provision in section 124PF of the SSA Act.

The Bill brings forward the date participants can leave the program. In all locations except the Northern Territory and Cape York, income support recipients will be able to have 100% of their payments deposited in their normal bank account. Depending on when the Bill is passed, this could be as early as September 2022.

This option will not be available to cashless debit card participants in the Northern Territory and Cape York. People who are currently compulsory cashless debit card participants will be able to leave the cashless debit card program on the closure day but may be moved to compulsory income management. If this occurs, they will continue to have their payments restricted.

Closure day and repeal day

Item 1 in Part 1 of the Bill defines two days:

• closure day being the day the cashless debit card program will be closed to new entrants and program participants can ask to leave the program and
• repeal day being the day the cashless debit card program is abolished due to the repeal of Part 3D of the SSA Act.

The closure day will be the later of the day after Royal Assent and 19 September 2022.

The repeal day will be no later than six months after Royal Assent—although the Governor-General can proclaim an earlier date.

The sunset provision

The cashless debit card program is enabled by Part 3D of the SSA Act. Section 124PF within Part 3D includes a sunset provision the effect of which is that the cashless debit card program must cease at the end of 31 December 2022.

Item 32 in Part 1 of the Bill repeals the sunset provision.

What happens to cashless debit card participants outside the NT and Cape York?

In Ceduna, the East Kimberley, the Goldfields and in Bundaberg and Hervey Bay cashless debit card participants will be able leave the program by making a request to the Secretary (items 33–36 in Part 1 of the Bill).

The Secretary will be required to give the person a notice that specifies the day on which they are no longer a program participant. This day must be no later than seven days after the person made the request.[39]

New participants will not be placed on the cashless debit card program from the closure day onwards.[40]

What happens to cashless debit card participants in the NT?

Currently income support recipients targeted by income management are offered a choice of income management or the cashless debit card. The Bill will take away this choice when Part 3D is repealed. Importantly, the Bill may operate to force income support recipients in the Northern Territory who formerly chose the cashless debit card back onto income management.

Number of persons effected

As at 3 June 2022 there were 3,931 cashless debit card participants in the Northern Territory, 78% of whom are Indigenous.[41] Income support recipients who choose the cashless debit card have the same proportion of their payments restricted as they would have had on income management. For most Northern Territory recipients this is 50%.[42]

Income management is structured around ‘measures.’ Each measure applies to a particular group of income support recipients (for example, disengaged youth or long-term welfare payment recipients), and income manages a particular percentage of a person’s income support payments.

The two measures with the largest number of participants in the Northern Territory are the Long-Term Welfare Payment Recipient measure (15,906 participants) and the Disengaged Youth measure (4,673 participants).[43]

How the Bill works

Part 1 of the Bill amends Part 3B of the SSA Act which establishes the income management regime. In particular, it sets out the various reasons that a person may become subject to the regime and how their payments will be made.[44] Table 2 lists those reasons and the section of the SSA Act in which they are detailed

Table 2: existing income management measures

The Bill works in the following ways:

• first it identifies those persons who use the cashless debit card in the Northern Territory. Items 2, 4, 7, 8, 11, 12, 15–19 and 27 amend the sections in Table 2 by making reference to a person who ‘was a program participant under section 124PGE on the day before the closure day’. This is a specific reference to persons using the cashless debit card in the Northern Territory
• second, it allows the Minister to make a legislative instrument to determine that those persons (or a subset of those persons) are members of a class of persons[45]
• third, once a person has been declared a member of a specific class of persons, the Bill operates so that the person will be subject to the income management regime for the same reason as other members of that class. These amendments mean that people currently on the cashless debit card can be transitioned to income management under the appropriate measure and
• finally, the Bill preserves those decisions of the Secretary which have been made under subsections 124PHA(1) (that a person is not a CDC participant because it would pose a serious risk to the person’s mental, physical or emotional wellbeing) and 124PHB(3) (that the person can demonstrate reasonable and responsible management of the person’s affairs).[46]

What happens to cashless debit card participants in Cape York?

Cashless debit card participants in Cape York also will also be able to be transitioned to income management.

As at 3 June 2022 there were 107 cashless debit card participants in Cape York.[47] Income management participants were transitioned to the Cashless Debit Card on 17 March 2021.

How the Bill works

Items 20-26 of the Bill amend section 123UF to require the Queensland Commission to issue a notice on or after the closure date to trigger entry or re-entry into the income management regime for persons exiting the CDC program in Cape York.

Concluding comments

The Bill leaves open the possibility that compulsory income management may continue in the Northern Territory and that some or all current cashless debit card recipients will move to compulsory income management when the cashless debit card is abolished.

The Government’s plans for compulsory income management in the Northern Territory are unclear. In an interview with Patricia Karvelas on ABC’s Radio National, the Minister for Social Services, Amanda Rishworth refused to rule out continuing some form of compulsory income management:

In terms of the BasicsCard, the income management that predates the Cashless Debit Card, we've said that we want to work with communities in the Northern Territory about what the future of that type of income management looks like. So I would like to have a lot of consultation about that.[48]

It may be that compulsory income management will continue only in communities where a significant number of local people ask for it. It is also possible that the Government will abolish compulsory income management entirely. This Bill appears to be designed not to close off the Government’s options.